RE:Cowen/Rafi Khan->***Medinah's Price a key target in Bermuda Short***
2002-08-22 10:10 PT - Street Wire
by Brent Mudry
Veteran North Vancouver penny stock promoter ***Les Price***, one of numerous Howe Street figures busted in Operation Bermuda Short last week, may prove to be one of the most interesting figures to U.S. and Canadian authorities. ***Mr. Price*** is the key bridge player, the only one of 58 individuals indicted in the overall three-year FBI-RCMP joint undercover operation known to have had pertinent direct dealings with targets in both phases of the probe: the bribed mutual fund manager sting and the money laundering sting.
***Mr. Price***, 64, was arrested and charged last week with securities fraud in relation to his pink-sheets promotion, ***Medinah Minerals***, in one of 20 grand jury indictments naming 52 individuals, including 14 Canadians, in the greased fund manager operation. The Howe Street promoter, currently in custody in Miami, is expected to face a bail hearing Monday. All parties remain presumed innocent until proven guilty.
The money laundering sting was smaller, featuring five Canadians among six targets in three overlapping grand jury indictments. While the bribery sting targets featured a mix of Vancouver and Toronto penny stock players, all five Canadians in the money laundering case are players on Howe Street, the centre of dealings for the former Vancouver Stock Exchange, dubbed Scam Capital of the World by Joe Queenan in Forbes magazine over a decade ago.
The alleged money launderers include controversial former lawyer Martin Chambers, who beat a Miami-Vancouver cocaine importation rap two decades ago, Kevan Garner and his partner John Kenneth (Jack) Purdy, and forestry entrepreneurs Ronaldo (Ron) Horvat and Harold A. Joliffe. Hours after a Stockwatch article Tuesday, Mr. Purdy, a key director, major shareholder and spokesman of Vertigo Software, a TSX Venture Exchange promotion of Howe Street promoter Don Sheldon, publicly resigned from the company's board.
While ***Mr. Price*** is not mentioned in any of the three money laundering indictments, he recently had direct dealings with one of the targets, Mr. Jolliffe. In September, 2000, while the RCMP end of the undercover operation was in full swing, one of ***Mr. Price's*** OTC Bulletin Board companies, NP Energy Corp., acquired a major interest in Bolivian Hardwood Corp., the only company noted in the money laundering indictments, and named Hardwood principal Mr. Jolliffe to NP Energy's board.
There is no suggestion, of course, that ***Mr. Price*** had any involvement or any knowledge whatsoever of any drug money laundering operations. His dealings with Mr. Jolliffe, however, place him in a rather unique situation. If ***Mr. Price*** chooses to co-operate with authorities and provide helpful information on players in both phases of the Bermuda Short sting, he may be able to leverage his hand and win a sweeter deal than any others who decide to flip. While few of the arrested Howe Street figures are young spring chickens, ***Mr. Price***, at age 64, may be quite motivated to avoid spending the rest of his life in prison if his lawyers discover the U.S. has a strong case against him.
***PRICE UNLUCKY WITH SHAMROCK***
***Mr. Price*** had the misfortune of picking a notorious U.S. brokerage when he tried lining up a $5-million financing for his ***Medinah Minerals***, allegedly by planning a $1.5-million bribe for an undercover FBI special agent posing as a dirty mutual fund manager. (All figures are in U.S. dollars.) ***Mr. Price*** picked Shamrock Partners of Media, Pa., a house well known to authorities. (Shamrock also served as one of 13 market makers for ***Mr. Price's*** other promotion, NP Energy.)
Shamrock is best known for its star former broker, Rafi Mohamad Khan, a close former associate of notorious boiler-room operator Irving Kott, the prime target of a high-profile, multi-year United States Securities and Exchange Commission investigation leading right to Howe Street. Mr. Khan flipped to become a star witness for the U.S. Department of Justice in the fall of 1998.
Shamrock figures are named in two of the 23 federal grand jury indictments unsealed recently in United States District Court for the Southern District of Florida. The first, relating to ***Medinah***, names ***Mr. Price and Joseph R. (Joe) Huard***, one of the founders and officers of Shamrock. The second, relating to another penny stock deal, Lighthouse Fast Ferry Inc., names ***Mr. Huard***, its owner James T. (Jim) Kelly and close associate Bruce D. Cowen, the chairman and chief executive officer of Capital Research Ltd., of San Juan Capistrano, Calif., the home of the famous swallows. While the shamrock may be a good-luck charm for Irish folks like Mr. Kelly, the proverbial birds are now coming home to roost.
Operation Bermuda Short is just the latest setback for the folks at Shamrock. In April, 2001, the SEC fined the brokerage and three key aiders and abettors of Mr. Khan's 1995 rig job of L.L. Knickerbocker, Mr. Kelly and two traders, a total of $85,000. Mr. Kelly was given a six-month ban on acting in any supervisory capacity with any brokerage, while the two traders were fined $5,000 and banned for three months each.
The Knickerbocker settlements came 10 months after Mr. Khan agreed to a five-year brokerage ban for his egregious rig jobs of Knickerbocker in 1995 and Future Communications in 1993. The controversial former broker and penny stock promoter was not fined a penny for either rig job, a measure of just how valuable he is to federal officials.
Mr. Kelly also had the misfortune of running afoul of regulators a few years before his Knickerbocker settlement. On Nov. 12, 1998, the SEC found that Shamrock Partners and Mr. Kelly violated the National Association of Securities Dealers' Rules of Fair Practice by charging clients excessive markdowns. The SEC supported a joint fine of $15,000 against Shamrock and Mr. Kelly, plus restitution of $10,053 and payment of hearing costs. In the NASD prosecution of this case, Mr. Price's current co-accused, ***Mr. Huard***, gave testimony, although the Shamrock executive vice-president and financial officer was not charged himself.
Shamrock also emerged as a key conduit in an unrelated but much more serious criminal penny stock case. The Pennsylvania-based brokerage was one of a small handful of firms used by a notable stock fraud ring to service nominee accounts. Las Vegas penny-stock shell engineer Robert E. Potter and his partner Peter E. Berney, key associates of career Vancouver fraudster Michael Mitton in the H & R Enterprises scandal, were prime players in this ring of mob-linked penny-stock promoters which used extortion, threats and violence to coerce brokers and co-conspirators to keep them in line, according to several U.S. indictments.
In one case, Herbert Jacobi, the Las Vegas pair's New York attorney, who also served Mr. Mitton in the H & R affair and helped the now-jailed Canadian wire H & R proceeds to Panama, risked his fine penny-stock legal career by allegedly buying stolen FBI records in a blundering bid to check the status of a New York prosecution against Mr. Potter.
In another case, broadly spanning from November, 1995, or April, 1996, through November, 1998, New York-area defendants Peter Liounis, Christian Rizzo, Walter Culkin, Vladimir "Vinny" Shtutman (also known as Vinny Shtuts), Oleg "Alex" Feldman and Shaun Neal flogged Sports Vision and Surequest shares from a boiler-room office in Manhattan. The ring allegedly received more than $8-million from the sale of Sports Vision shares and more than $2-million from the sale of Surequest shares through nominee accounts at Shamrock and a few other image-challenged brokerages.
In one of the scariest encounters, Mr. Rizzuto, Mr. Liounis, Mr. Culkin and Mr. Rizzo confronted one co-conspirator at the MGM Hotel and Casino in Las Vegas on Jan. 9, 1998, and after receiving $2,000 in cash, demanded another $100,000 on the following Monday and a further $250,000 on the following Wednesday. The fearsome foursome allegedly directly and indirectly threatened to harm members of the conspiracy if their payment demands were not met.
The shadow of Mr. Khan also lurked over Shamrock in several other cases in recent years. In 1998, Nancy Martin, the manager of a Shamrock branch office in Newport Beach, Calif., was fined $20,000 and banned for any association with any brokerage in any capacity. Ms. Martin was disciplined for failing to supervise broker Tariq Khan, Rafi Khan's nephew, although she claimed on appeal that the younger Khan was the president of the company that owned Shamrock.
***PRICE STUNG IN PENNY STOCK BRIBERY SCHEME***
Against this backdrop of shady Shamrock dealings, U.S. authorities claim Howe Street promoter ***Mr. Price*** began working on a Medinah kickback financing last fall. The alleged conspiracy covers the period from October, 2001, to this June.
***Mr. Price and Shamrock's Mr. Huard*** allegedly conspired to bribe an undercover FBI agent, posing as a fund manager, to buy five million shares of Medinah for $5-million, or $1 a share, at a time when the stock was trading at just six cents. "Defendant ***LES PRICE*** agreed to pay undisclosed kickbacks to the UCA and others at the fund so that they would violate their fiduciary obligations by purchasing a large amount of overpriced MDMN stock with the fund's money," states the grand jury indictment.
"Defendant ***LES PRICE*** agreed to pay approximately 30% of the $5,000,000 purchase price as an undisclosed kickback to defendant ***JOSEPH R. HUARD JR***., the UCA (the undercover FBI agent,) CWs (unidentified 'co-operating witnesses' posing as dirty fund officials) and a purported corrupt manager of the fund to induce the fund to purchase approximately $5,000,000 of overprice MDMN stock rather than shares of another company's stock."
In a covertly recorded Oct. 17, 2001, call, ***Mr. Price*** advised the undercover agent and the co-operating witnesses that another Medinah official would meet them in Florida to discuss the big financing, but the officer was "not really intimate on how these things work." In another call six weeks later, on Nov. 30, 2001, ***Mr. Huard*** chatted with the undercover federal operatives about the stock purchase-kickback scheme, including when ***Mr. Price*** would fly down from Vancouver to Miami to meet them in person.
Things were apparently going so well that ***Mr. Price*** felt emboldened to issue a false Medinah press release on Jan. 31 announcing thee "signed completion" of a $5-million financing package. "The first deposit of moneys, memorializing the framework of the funding deal, have been received into the Medinah Minerals, Inc. bank account." The Howe Street promoter forgot to mention this first deposit was a test trade of 25,000 shares for $25,000, complete with an alleged $9,980 kickback wired that same day from Medinah's bank account in Vancouver to the undercover FBI agent's bank account in Miami. (This kickback wire earned ***Mr. Price a charge of money laundering.)***
"When Medinah Minerals, Inc. is released from its Non-Disclosure Agreement mandates, Management will identify the funding party. The balance of the entire five million dollar ($5 million) funding package is scheduled to be received by Medinah Minerals, Inc. over the course of the next three business week," stated the company in its press release.
A month later, ***Mr. Price*** was still confident even though no more of the $5-million financing had materialized. "On or about February 26, 2002, during an international telephone call, defendant ***LES PRICE*** told the CWs that the 'deal's still on. You just gotta sort out your marketing team.'"
The big financing mysteriously flopped and a grand jury subsequently handed down a grand jury indictment on July 25 charging ***Mr. Price and Mr. Huard*** with a total of 14 counts.
Unbeknownst to the targets, a Miami grand jury handed down another indictment two months earlier, on May 28. This indictment, involving a similar bribery scheme for Lighthouse Fast Ferry, named ***Mr. Huard***, Shamrock owner Mr. Kelly and their close associate Mr. Cowen. Mr. Cowen served as purported chairman of Capital Research Ltd., which shared Shamrock's address in Media, and as managing director of The Lancer Group, a purported hedge fund based on Wall Street.
Shamrock's Mr. Kelly and Capital's Mr. Cowen were apparently quite close. "Jim Kelly, my partner and I have developed this comprehensive proposal ... we are a results-driven firm," stated Mr. Cowen in a 1999 engagement letter for another bulletin board client, Total Film Group. "Jim's firm, Shamrock Partners, is currently a market maker in your stock," Mr. Cowen reminded Total Film.
The aura of Rafi Khan lingers on. In recent years, Capital Research has also been involved with Aura Systems, Symposium Telecom and Lighthouse Fast Ferry, which feature similar players and offshore flavours with Total Film.
On April 3, the SEC revealed it is investigating whether Mr. Khan used a Pakistani holding company and his wife, Rubina Khan, to trade shares of four companies: Aura, Ontro Inc., Adnan Khashoggi's GenesisIntermedia Inc. and eUniverse Inc., in contravention of a market ban imposed two years ago. According to court filings, the Khan family holding company, Aura Private Ltd., or Aura Pvt. in short, traded through brokerage accounts in Canada, as well as the U.S.
(The current SEC investigation is especially unfortunate for Aura Systems, as the company has been rebuilding its reputation and credibility in the wake of an SEC accounting and auditing prosecution in 1996. The SEC charged Aura, chief executive and chairman Zvi Kurtzman, and accountants Francis T. Phalen and Joseph Bevacqua with boosting Aura's 1993 and 1994 revenues by 22 per cent and 11 per cent, respectively, through booking a bogus transaction with a company called John Jory Co. In June, 2001, Mr. Kurtzman, who headed Aura since 1987 and remains its CEO and chairman, joined the board of Ontro.)
Large blocks of one Khan promotion, Aura Systems, are held at Vancouver-based Canaccord Capital and Toronto-based CIBC World Markets, according to regulatory filings, although there is no allegation these clients were involved in, or even aware of, Mr. Khan's activities.
Regulatory filings also show that Mr. Khan's nephew, Tariq Khan, served as president of Ontro in 1998. The young Khan, as noted above, is also a graduate of Shamrock, like his uncle Rafi Khan.
PRICE AND HARDWOODS
The three Bermuda Short drug money laundering indictments target long-time Howe Street promoter Mr. Purdy, his partner Mr. Garner, former lawyer Mr. Chambers, forestry associates Mr. Horvat and Mr. Jolliffee, and Bahamian accountant Michael Hepburn.
One indictment leads off with Bolivian Hardwood, a private company engaged in harvesting timber in Bolivian. Mr. Jolliffe is described as a principal of Bolivian Hardwood, while Mr. Horvat is described as a corporate officer. Howe Street promoter Mr. Purdy is also described in the Bermuda Short indictment as a principal of Bolivian Hardwood.
In one of the intriguing coincidences of the overall case, NP Energy, one of Mr. Price's public companies, acquired a 10-per-cent stake in Bolivian Hardwood in September, 2000, with an option to acquire an additional 39-per-cent stake.
"NP Energy Corporation plans to raise several million dollars in order to expand operations of Bolivian Hardwood to further develop markets for the lumber produced and to substantially increase the company's timber acreage position in Bolivia," stated the company in its release.
"The Directors of NP Energy Corporation are also pleased to announce that Mr. Harold Jolliffe has joined the board of directors of the company. Mr. Jolliffe is currently one of the principals in Bolivian Hardwood Corporation and has decades of experience in all aspects of forestry, logging and saw milling. Mr. Jolliffe previously held important educational posts with forestry departments in British Columbia's leading secondary education institutions."
"Management of NP Energy Corporation firmly believes that the acquisition of this interest in Bolivian Hardwood Corporation and the addition of Mr. Harold Jolliffe to the board of directors, will quickly move the company forward following its recent reorganization that was approved at the Special Stockholder's Meeting May 22, 2000." |
